DAX index set to see recovery continue despite Wirecard departure
The German blue-chip index closed marginally lower on Thursday, but the benchmark is likely to continue its march higher despite Wirecard being removed after becoming insolvent.
The DAX index closed 0.5% lower on Thursday to 12,993.71 points. However, the German benchmark is expected to continue its march upward despite Wirecard being removed from the index after collapsing into insolvency in June.
German blue-chip stocks struggled on Thursday, after four days of consecutive gains, with the US government’s announcement that it will keep 15% tariffs on planes and 25% tariffs on other EU goods hitting Europe’s largest exporter hard.
But overall, German equities remain resilient, with the DAX managing to shrug off news of Britain’s worst recession since records began earlier this week. Investors also appear to be happy to put the first six months of 2020 firmly behind them, choosing to focus their attention on the second half of the year after UK corporate earnings data proved relatively resilient.
It is worth nothing that DAX futures are down marginally at the time of publication, suggesting that the index could open lower on Friday morning.
DAX index: technical analysis
The DAX pullback seen overnight has been shallow in nature, pointing towards another move higher looking likely before long, according to Josh Mahony, senior market analyst at IG.
‘With price rising marginally through the 76.4% Fibonacci retracement, another leg higher from here would go a long way to negating the idea that we are in a bearish retracement phase,’ Mahony said. ‘The rising wedge pattern also adds to that possibility.’
‘However, with the overnight pullback proving minimal in nature, another leg higher could take us closer to a wider bullish breakout through 13,315,’ he added. ‘Ultimately, we would need to see the 12,807 level broken to negate this short-term uptrend in play.’
Wirecard finally cut from the DAX index after insolvency
The insolvent German payments company, Wirecard, will finally be removed from the DAX index this month after the exchange operator Deutsche Boerse amended its selection rules.
Deutsche Boerse announced on Thursday that from 21 August, a rule change will be implemented that will allow it to remove insolvent companies from the DAX with just two trading days’ notice. The exchange operator noted that the rule change will apply to Wirecard, ‘given the current situation’.
Wirecard was once the darling of European fintech, only for it to collapse into insolvency in June after it was unable to locate €1.9 billion and admitted that the cash likely did ‘not exist’.
The action taken by Deutsche Boerse comes just weeks away from its quarterly index review which is scheduled to take place on 3 September.
Wirecard first became a member of the DAX index in 2018, replacing Commerzbank. Online food delivery service, Delivery Hero, is expected to join the benchmark after Wirecard is removed.
DAX index: After-hours trading with IG
IG offers extended hours trading options for the DAX index and other major indices. Buy long or sell short on the DAX via CFDs and other instruments provided by IG's market-leading trading solution. Start by opening a live or demo account with IG today.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Take a position on indices
Deal on the world’s major stock indices today.
- Trade the lowest Wall Street spreads on the market
- 1-point spread on the FTSE 100 and Germany 40
- The only provider to offer 24-hour pricing
Live prices on most popular markets